Correlation Between Lautan Luas and Sawit Sumbermas

Can any of the company-specific risk be diversified away by investing in both Lautan Luas and Sawit Sumbermas at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Lautan Luas and Sawit Sumbermas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lautan Luas Tbk and Sawit Sumbermas Sarana, you can compare the effects of market volatilities on Lautan Luas and Sawit Sumbermas and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Lautan Luas with a short position of Sawit Sumbermas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lautan Luas and Sawit Sumbermas.

Diversification Opportunities for Lautan Luas and Sawit Sumbermas

0.24

Correlation Coefficient

Lautan Luas  Sawit Sumbermas

Modest diversification

The 3 months correlation between Lautan and Sawit is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lautan Luas Tbk and Sawit Sumbermas Sarana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sawit Sumbermas Sarana and Lautan Luas is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Lautan Luas Tbk are associated (or correlated) with Sawit Sumbermas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sawit Sumbermas Sarana has no effect on the direction of Lautan Luas i.e., Lautan Luas and Sawit Sumbermas go up and down completely randomly.

Pair Corralation between Lautan Luas and Sawit Sumbermas

Assuming the 90 days trading horizon Lautan Luas Tbk is expected to generate 0.46 times more return on investment than Sawit Sumbermas. However, Lautan Luas Tbk is 2.18 times less risky than Sawit Sumbermas. It trades about -0.13 of its potential returns per unit of risk. Sawit Sumbermas Sarana is currently generating about -0.1 per unit of risk. If you would invest  116,000  in Lautan Luas Tbk on February 3, 2024 and sell it today you would lose (11,000) from holding Lautan Luas Tbk or give up 9.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lautan Luas Tbk  vs.  Sawit Sumbermas Sarana

Lautan Luas Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lautan Luas Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Sawit Sumbermas Sarana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sawit Sumbermas Sarana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Lautan Luas and Sawit Sumbermas

The main advantage of trading using opposite Lautan Luas and Sawit Sumbermas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lautan Luas position performs unexpectedly, Sawit Sumbermas can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sawit Sumbermas will offset losses from the drop in Sawit Sumbermas' long position.

The idea behind Lautan Luas Tbk and Sawit Sumbermas Sarana pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.